The shocking truth about energy prices

They are even less trusted than estate agents, according to a government study in 2008: energy providers are the companies we most love to hate.

And with gas and electricity bills soaring and the firms' excuses for price hikes wearing increasingly thin, their reputation looks set to go from bad to worse.

Most of us have faced huge rises in our energy spending over the past four years. Last winter, all of the 'Big Six' power companies raised their prices between 2% and 9%. If you factor in forthcoming price increases, the average dual fuel bill will have risen by 50% since 2007.

It's not surprising that consumers are asking whether the reasons they're given for price increases really add up. Are we being told the truth by prospective suppliers when we shop around for a better deal? And are smaller operators any better than their mammoth rivals?

E.on's prices went up on 13 September by 11.4% for electricity and 18.1% more for gas. Scottish and Southern Energy customers will pay 11% more for their electricity and 18% more for gas.

NPower have introduced its 7.2% and 15.7% increases for electricity and gas respectively.

British Gas and Scottish Power both introduced higher prices in August and EDF Energy were the last of the 'Big Six' to hike prices - 5.4% for electricity and 15.4% for gas - which will come into effect in November.

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Pack mentality

Richard Hall, an energy specialist for Consumer Focus, says: "When it comes to pricing behaviour, we see a pack mentality among the major energy suppliers. Price adjustments are made not to undercut competitors but to match them."

So what's the real reason for these inflated bills? It's simple, say the energy suppliers: higher wholesale prices.

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"We're working hard to keep prices as low as possible for our customers, but between spring and autumn last year wholesale gas prices increased by more than 25%," says a spokesperson for British Gas. "Other costs, such as network charges and environmental obligations, also rose by 6% between February and September 2010."

Selling us short

But many consumers believe energy firms are using global events as an excuse to rip us off.

While wholesale prices have certainly increased, energy watchdog Ofgem has recently released figures suggesting there was a difference of 27% between the amount big suppliers paid for electricity last year and the amount they charged for it. For gas, the gap was 15%.

"The recent price rises are in excess of what can be justified," says Hall. "The bigger energy firms have benefited from passing on these rises to customers."

A spokesperson for Scottish Power says: "Continuing unrest in global energy markets means future prices are volatile. We understand times are difficult for many people and we've done what we can to absorb these additional costs for as long as possible."

However, the large firms continue to report bumper profits. Last year British Gas raked in £742 million, while its parent company Centrica saw its profits mushroom to £2.4 billion. Scottish Power, meanwhile, posted core profits of £1.2 billion.

Saving face

The level of public dissatisfaction with the energy industry is so great that Ofgem has been forced to talk tough.

Having investigated the gas and electricity market's complex structure and its more questionable practices, the watchdog has promised to introduce a radical overhaul. It has made a series of recommendations, in order to improve trust in the industry and open it up to greater competition. It has even threatened to involve the Competition Commission if the Big Six fail to embrace these reforms.

Ofgem wants to improve transparency so that consumers can calculate whether price increases are justified, and is calling for a vastly simplified tariff structure. "Energy tariffs are really confusing, with hundreds of different products available," agrees Scott Byrom, energy expert at

"Even if you hear that your provider is offering the cheapest energy prices, it's highly unlikely that you're on the best-value tariff. If you've never swapped, you're more likely to be on the most expensive energy deal, missing out on hundreds of pounds of savings."

Your Comments

I recently used a comparison site to change my Gas & Electricity suppliers, and at the time there was no announcements of high price increases forom my preferd supplier, British Gas..I chose a normal (i.e. not pegged supply cost to keep my otions open. After going on holiday I returned to hear that British Gas were announcing a large price hike. On seeing this I telphoned the Which comparison site and arranged through them to change to Scottish Power with a fixed pricetarif until early 2013. I was assured that the current change going though to British Gas would not be implemented and the change would go through to Scottish Power without problems.
It then turned out that British Gas had started the supply in mid June despite knowing at the time the transfer was in process to ScottishPower. I ten got an Estimed Final account for Electricity for the eriod 18th June to 7th July and an Actual Gas final account for the period 22nd June to 20th July. On the electricity account there appeared two cancellation fees of £30.00. At no time in the change to British Gas was there any mention of cancellation fees, and in any case they were well aware that the change was taking place so they seem to have gone ahead anyway on the basis that the cancellation fees will produce a nice little earner. Whatever has happened to The Duty of Care that companies have towards their customers.
I am apalled that these big companies seem to operate in a cloud cuckoo land of their own making.
The actual accounts themselves were just a mass of figures which I could not understand, theyb do not seem to be able to produce clear and simple layouts on thier accounts. It is time that they undestood that the majority of their customers do not have advanced degrees in finance and cannot understand what is sent out to them.
Jim Gerllan-Adams

I think its disgusting what these companies are up to! You cant justify continued unrest in the global energy market and THEN hike up the price and THEN announce PROFITS. We are all being robbed. The Government should step in and put a stop to all of this. The way the bill is designed you really cant work out if one company is better than another one. So much energy usage at one price - then its goes up into another tier, which makes it virtually impossible to work out who is cheaper!

Ofgem is totally useless. Why are there 460 tariffs? Why is it allowed that energy
companies can arbitrarily choose whatever criteria to price energy, e.g,charging
different prices for tier1 and tier2, fixing tiers at their sole discretion to confuse and hoodwink customers. Another favourite ploy is to incarcerate customers in
expensive cancellation fees. Loyal customers are not allowed to switch to cheaper tariffs.Why can't Ofgem clamp down on such anti-competitive practices
of energy companies?

Has I have said before, The Government will do nothing about these price hikes since they get extra tax, on the green issues, The only way change will come is a full press/media publicity drive saying why is the U.K. payimg more than any other E.U Country

£742 million PROFIT that is disgusting, & prices are still going up ? why ? we are all struggling to pay now. there should be a top level on how much profit every firm can make, maybe then our prices will fall. OR everyone should stick together & cancel our electric & go back to candles again then the prices WOULD HAVE TO DROP.

The Government should just Nationalise all Gas and Electric and run it for the benefit of the Country. If it just has to break even and not make a profit then all citizens would benefit. It would also be much easier to assure reliable supply and plan our energy usage for the future.

I work for a energy company and they only make 4% profit on residential customers but they make 10 - 15% on commercial and industrial customers I don't understand how they make so much money every year but charge us more and more. my advice get a fix price now with one of the company's who haven't put there prices up and do it quick.

Switching is easy. Figuring out if you have the best deal is pretty much impossible. This is due to the irreversibility of the decision. Once you have decided to switch supplier you will only ever know how much your supply costs from that supplier. You can’t trial two companies simultaneously and see who works out the cheaper. Nor are the ‘savings’ easy to work out, as research by one of the leading switching sites found that 75% of consumers were confused by their energy bill.
I have been one of these switchers and, looking back over my direct debits over the past couple of years, I have found it impossible to work out whether I have saved any money by doing so. All I have noticed is that the bills have continued to rise regardless of who I was contracted with until I switched to Good Energy: this year my direct debit has actually gone down!

IF you were charged £30.00 per fuel when you left you would have been on a fixed rate or capped, therefore your price would not hve increased

You all must join the protesters outside of Wall St & London Stock Exchange. These people are the same Companies doing the same things to us all. Yesterday I signed an e-partition reference "Save our Savers" there were only 1700 signatures on this. All savers are being punished. It's your own fault if you sit on your backside & do nothing. British Citizens have done it for too long, time to do something about it.

Why is it that the large suppliers all claim to be absorbing costs and holding back on the size of the increases, yet still are able to make massive profits. The only people they make their profits from are of course the customers ie US.
Also why is it that the smaller suppliers outside of the big six, can by utilities from the big six and sell them onto us at less than the big six and still make a profit?


The government will never make the utility companies reduce their prices as this would reduce the VAT we pay.
I know it's only 5% but how much does all of this equate to in a year?
Also, the more profit the utilities make, the more tax the government gets from them.

npower has just been "fined" £2,000,000 by Ofgem, as have other utility companies - where does this money go?
Certainly not back to the consumer.

Similarly with petrol and diesel, the government will never make the oil companies reduce their prices because that would reduce the fuel tax and VAT we pay on petrol and diesel which the government gets and it also would reduce the tax they get from the profits of the oil companies.